How to use this calculator
Enter your monthly gross rental income and any additional income from sources like laundry, parking, or storage. Set your expected vacancy rate to account for periods without tenants.
Add your monthly operating expenses including property taxes, insurance, HOA fees, maintenance, property management, and any other recurring costs. These are expenses required to operate the property, not including debt payments.
Enter your monthly mortgage payment (principal and interest only) and any other debt payments tied to the property. The calculator will compute your DSCR, NOI, and annual cash flow, then show how your ratio compares to common lender requirements.
Understanding DSCR
The Debt Service Coverage Ratio tells you how much cushion exists between what a property earns and what it owes in debt payments. A DSCR of 1.0 means the property breaks exactly even. Anything above 1.0 means positive cash flow after debt service.
Lenders use DSCR to determine whether a property can reliably service its loan. The higher the ratio, the more comfortable lenders feel because there is a larger margin of safety if income drops or expenses increase unexpectedly.
DSCR loans are a popular financing option for real estate investors because qualification is based on the property's income rather than the borrower's personal income. This makes them ideal for investors with multiple properties or self employed borrowers with complex tax situations.
Frequently asked questions
What is a good DSCR for rental property?
A DSCR of 1.25 or higher is considered solid and qualifies for most commercial loan programs. A ratio above 1.5 is excellent and typically earns the best interest rates and loan terms. Below 1.25, your financing options become more limited and expensive.
Does DSCR include property taxes and insurance?
Yes. DSCR is based on Net Operating Income, which subtracts all operating expenses (including taxes and insurance) from income before comparing to debt payments. Only the mortgage principal and interest are in the debt service portion.
How is DSCR different from debt to income ratio?
DTI measures your personal debt obligations against your personal income. DSCR measures only the property's income against the property's debt. DSCR loans use the property ratio instead of your personal DTI, which benefits investors with high personal debt loads.
What happens if my DSCR drops below 1.0?
A DSCR below 1.0 means the property does not generate enough income to cover its debt payments. You would need to fund the shortfall from personal income or reserves. Some loan covenants require maintaining a minimum DSCR, and falling below it could trigger default provisions.
Should I include capital expenditures in DSCR?
Standard DSCR calculations use operating expenses only and do not include capital expenditures (roof replacement, HVAC systems, etc.). However, including a capital reserve in your expense estimates gives you a more conservative and realistic picture of long term coverage.